Marketing Plan PDF

INTRODUCTION 1. CONCEPT AND OBJECTIVES. Marketing: It is about achieving the company's goals by meeting or exceeding what customers want and need better than the competition. The idea is to provide value (something beneficial or desirable) to customers in a way that still makes the company a profit....

INTRODUCTION 1. CONCEPT AND OBJECTIVES. Marketing: It is about achieving the company's goals by meeting or exceeding what customers want and need better than the competition. The idea is to provide value (something beneficial or desirable) to customers in a way that still makes the company a profit. Strategy: This is a plan or method chosen to reach a specific goal or solution to a problem. The importance of STRATEGY IN MARKETING: 1. Gives a clear DIRECTION to follow, so the company isn’t just making random decisions. 2. Develops systems for analyzing the ENVIRONMENT and COMPETITORS. 3. Builds the ability to ADAPT and ANTICIPATE changes in the market so the company stays competitive. 4. FORECASTS (predicts) when and how the product lineup should be updated to keep up with market trends. 2. THE MARKETING STRATEGY. - A marketing strategy integrates the company’s goals with its main policies to gain a competitive edge. It’s all about using knowledge of the market to create a plan that keeps the company ahead. - The marketing plan is the DESCRIPTION of the marketing strategy. - The strategy is usually LONG-TERM and affects the whole organization, requiring significant resources (like time, money, and people) to implement. 1. INITIAL SITUATION - Who/Where are we? - MISSION: Describes the company’s reason for existence. - VISION: Describes the organization as it would appear in a future successful state. - VALUES: Describe what the organization believes in and how it will behave. 2. ANALYSIS - What Problems do we face? What’s our current situation? 3. ANALYSIS OF THE ENVIRONMENT. - The Law of Supply: As the price of a product decreases, the quantity supplied also decreases (and vice versa). - The Law of Demand: As the price of a product decreases, the quantity demanded increases. - Equilibrium: The point where the quantity of a good supplied matches the quantity demanded. 1 Analysis Types: ★ External Analysis (Macro): This looks at larger forces that affect the company and its market. We use PESTEL: P Political: Factors like government stability, taxes, and regulations. For instance, companies might face higher taxes in some countries. E Economic:Economic factors such as growth, unemployment, and inflation. For example, during a recession, people may buy less. S Social: Social trends like demographics and lifestyles. If a population is aging, companies might offer more health-related products. T Technological: Technological advancements and innovations, like the rise of AI or new production techniques. E Environmental: Environmental concerns, such as climate change and recycling, affecting how companies make products. L Legal: Legal frameworks and laws, like employment and advertising laws, that the company must follow. ★ Internal Analysis-Supply (Micro): This looks at factors closer to the company that directly impact its ability to compete. We use PORTER’S FIVE FORCES: 1. Rivalry Among Existing Competitors - High Rivalry: Occurs when there are many competitors, high costs, or little product differentiation (when products are very similar). - Exit barriers: Are things that make it hard for a company to leave the market, like high investment costs or legal constraints. 2. Threat of New Entrants - Potential competitors: New companies that could enter the market, creating instability and potentially taking market share. - Entry barriers: They are obstacles that make it harder for new companies to enter, like needing significant investment, or established companies controlling distribution channels. 3. Threat of Substitutes - Substitutes: Products that serve a similar need but use different technology, like electric bikes being a substitute for traditional bikes. - A key risk here is that substitutes may offer better price or quality, pulling customers away. - Key Ideas: - Slow entry in the market as they require new product technologies - The company may stops the entry of its own substitutes, due to the possible cannibalization of their current market share 4. Bargaining power of Suppliers - Strong suppliers can increase prices or lower quality because the company depends on them. This power is stronger if there are few alternative suppliers. 5. Bargaining power of Buyers 2  - Strong buyers can push for lower prices or higher quality, especially if they buy in large amounts or have lots of other options. 3. MARKETING PLAN - What are we doing to solve our problems? 4. STRATEGIC VS TACTICAL MARKETING. - Strategic Marketing: They focus on long-term planning and broad goals. - Tactical Marketing: Short-term execution and specific actions. THE SURVIVAL MATRIX This matrix helps companies evaluate the effectiveness of their strategy and execution: 1. SUCCESS: An effective operational management combined with a suitable strategy. 2. PROBLEM: A good strategy with a bad execution. Problems to appear in the mid term. 3. SLOW DEATH: An unfitting strategy with an outstanding execution, unless we correct the strategy failure is shortly expected. 4. QUICK DEATH: Difficult to diagnose. Dangerous situation, difficult solution. 4. IMPLEMENTATION - Put the plan into action 1. EXECUTION: This is the actual carrying out of the plan, often measured by Key Performance Indicators (KPIs) like sales growth or customer satisfaction. 2. MARKETING AUDIT (MA): A review of the strategic plan to confirm that: a. The analysis and strategies are accurate. b. The objectives are achievable. c. The chosen actions are appropriate. d. Audits happen at the start of the planning cycle or after major changes. 3. STRATEGIC CONTROL: Follow-up on the strategic marketing to: a. Make sure that the actions are being developed according to the plan. b. Check if the results are meeting goals. c. If not, adjust the plan accordingly. 5. GOAL - Our Goal! Where are we going? 1. Increase market share. 2. Reposition the brand in the market. 3. Find a sustainable competitive advantage. 4. Enter new market segments. 3 5. PRODUCT-MARKET AND STRATEGIC BUSINESS UNIT. PRODUCT MARKET (PM) It is a way to define a specific group of customers and their needs, along with how a product satisfies those needs. - WHO: Who the product targets (e.g., buyers aged 20-30). - WHAT: The need or function it satisfies (e.g., quick meal solutions). - HOW: Technology used (e.g., frozen, ready-to-eat meals). The idea behind identifying product-markets is to help the company focus on who they are trying to serve, what needs they’re addressing, and how they’re going to do it. STRATEGIC BUSINESS UNIT (SBU) It is a distinct part of a company that focuses on a particular market or related products. It has its own strategy and management, separate from other SBUs. To make an effective SBU: 1. It should have an independent mission and target a defined group of competitors. 2. It should be able to create and implement its own marketing plan. 3. It must be big enough to need senior management but small enough for focused resource allocation. 4 POSITIONING 1. CONCEPT AND OBJECTIVES. 1. PRODUCT A product is any commercial offer that meets market needs through specific attributes. - For a product to be successful, it must provide value that aligns with consumer expectations. These expectations can vary based on how consumers perceive the product. The purpose of PRODUCT TRAITS: 1. Expectations about PHYSICAL, FUNCTIONAL and PSYCHOLOGICAL traits. 2. DETERMINANT ATTRIBUTES: These are the most important features that influence a buyer's decision to purchase. They help consumers compare different products. 2. CONSUMER ATTITUDE Consumer attitude: This refers to a learned tendency to have positive or negative feelings towards a product, brand, or idea according to prejudices. 1. Changing consumer attitudes is challenging, so it's often easier to adjust the product or how it's perceived. ❖ Attitudes can be built according to three axis: 1. KNOWLEDGE: Attitudes are formed based on past experiences or information about a product. 2. AFFECT: This is the emotional response (positive or negative) toward the product, influencing purchase intentions. 3. BEHAVIOR: Attitudes impact whether a consumer decides to buy the product. 3. POSITIONING KEY CONCEPTS 1. IDEAL POSITIONING - Market Demand - What is the ideal product that the market wants? Represents the perfect product features that the market desires. This is based on what segments value most in a product. - Neither the objective positioning nor the subjective positioning necessarily coincide with the ideal positioning. - The ideal positioning must align the strategy of positioning of the company, it is necessary to be the base of the objective positioning. 2. OBJECTIVE POSITIONING - Brand Building This is how a company wants its product to be perceived in the market. It involves aligning consumer perception with the desired brand identity. - These efforts represent the positioning process. - The perception of the customer does not have to match the positioning desired by the company. 3. SUBJECTIVE POSITIONING - Customer Perception - How is my product perceived by customers? 1 This reflects how customers actually perceive a product relative to competitors. Different market segments may have different perceptions of the same product. 4. PURCHASE INTENTION - Attitudes 5. PURCHASE BEHAVIOUR - To buy or not to buy 1. THE POSITIONING PROCESS. 1. Determination of the products/brands: Identify COMPETITOR BRANDS and the product categories relevant to your product. 2. Identification of the determinants attributes Determinant Attributes: Attributes to which the consumers assign more importance and they correspond to those who they bear in mind when buying a certain brand. - Find out which attributes are most important to consumers when making purchasing decisions. Typically, consumers focus on a few key attributes. 3. Building a positioning map Use different technologies to visualize how consumers perceive different products. This can be: 1. BIDIMENSIONAL MAP - Shows the position of products based on two key attributes. - The objective is not to reflect differentiated territories of value but the different position of the products / brands based on the same features. 2. MULTIDIMENSIONAL MAP Displays different products/brands in relation to several attributes, indicating value territories. 4. ANALYSIS OF CURRENT SITUATION Reading the positioning map. Reasons for this positioning. - Proximity in the perception of the bands B and C (higher share) - Isolated situation of the brands F (lowest share) and E. - Absence of brands in the top right quadrant (more softness and deodorant power) 2 5. Determination of Ideal Positioning - The product contains the combination of attributes preferred from the point of view of the consumer. - Different ideal positions for the product or brand that correspond to different groups of opinion can be identified. - Not all the consumers look for the same benefit: different market segments. 6. Positions and Segments Consideration Analyze consumer preferences across segments to identify strengths of different brands, competition intensity, and potential for differentiation. 7. Analysis and interpretation of results The final decision with regard to the positioning of the brand must be based on thorough analyses, considering current consumer preferences and competitor positions, as well as potential future trends and the company’s strengths and weaknesses. 8. Definition of the objective positioning (Positioning strategy) Objective Positioning: Communicate the product's key benefits and how it stands out from competitors. Consider attributes like quality, price, design, and consumer profile. Mistakes to Avoid: 1. UNDERPOSITIONING: When a brand fails to create a strong association in consumers’ minds. 2. OVERPOSITIONING: The market has a too concrete, limited image of a brand (for example, tiffany’s = high price, exclusive) 3. CONFUSED POSITIONING: Occurs with too many varying brand associations or frequent changes in positioning. 4. DOUBTFUL POSITIONING: Occurs with too many varying brand associations or frequent changes in positioning. 3. THE POSITIONING STRATEGY. → Identify the competitive advantage. 1. Product (Quality: Fairy) 2. Service (Quickness: Fedex) 3. People (Disney, emirates) 4. Image (Google) → Choose the global positioning strategy, through the value position. 1. More for more: Premium pricing for superior quality (e.g., Mont Blanc). 2. More for same: Comparable quality at similar prices (e.g., Lexus). 3. Same for less: Similar offerings at lower prices (e.g., Walmart). 4. Less for much less: Basic products for very low prices (e.g., Aliexpress). 5. More or less: Holy grail of marketing executives. 3 PRODUCT 1. CONCEPT AND OBJECTIVES. A product is any offering that meets market needs through a set of specific attributes (features). This includes not only physical items but also services, experiences, events, and ideas. Product Information: Companies should collect extensive data on each product, covering its attributes, costs, life cycle, target market segments, and more. This information aids in strategy, competition analysis, and understanding its position within the portfolio. PRODUCT ANALYSIS: Regular analysis, often annually, evaluates: - Commercial Qualities: How the product performs in the market. - Productive Qualities: Internal production and operational aspects. - Competitive Situation: Position relative to other similar products. - Relation with others' own products. PRODUCT LEVELS The products have a HIERARCHY OF VALUE in consumer perception: 1. CORE BENEFIT: The main reason a customer buys the product (e.g., a detergent’s core benefit is clean clothes). 2. BASIC PRODUCT: Fundamental features (e.g., detergent form like powder/liquid). 3. EXPECTED PRODUCT: Additional traits expected by consumers (e.g., pleasant scent). 4. EXPANDED PRODUCT: Extra features that exceed expectations but may become standard over time. a. If a company increases the price of the expanded product, the competence could offer the expected product at a lower price. 5. POTENTIAL PRODUCT: Possible future enhancements or innovations to satisfy evolving customer needs. (Ejm. Ariel → Dry cleaning at home?) 2. PRODUCT PORTFOLIO MANAGEMENT. The set of products that the company manufactures or commercializes. Each product plays a role for the organization. The product portfolio analysis aims to optimize THE INVESTMENT-DIVESTMENT DECISIONS and RESOURCES ALLOCATION among the different product-markets. ❖ TYPES OF PRODUCTS in the portfolio: - LEADING PRODUCTS: Key products with significant sales and profits. - ATTRACTION PRODUCTS: Attract the customer to sell leading products. They can be simplified or premium versions. Some are not profitable but increase sales. - PRODUCTS FOR THE FUTURE: Prepared to take over from leaders as they decline. 1  - REGULATORY PRODUCTS: Compensate the seasonal sales of the leaders, absorbing fixed costs. - TACTICAL PRODUCTS: Are intended to disturb competition or respond quickly to attacks from competitors, in order to avoid losing market share. ❖ Matrix models of PORTFOLIO ANALYSIS: The process of analysis is structured in four steps: 1. Definition of the unit with which to work: product-market. 2. Evaluation of every unit of analysis. 3. Examination of the interrelationships. 4. Determination of the project of future portfolio. BCG: Growth of the market-relative share Analyses: 1. MARKET GROWTH RATE (MGR) a. In fast growing markets it is easier to increase the market share. b. Fast growing markets require additional financing. 2. RELATIVE MARKET SHARE (RMS) a. The higher the production level the lower costs per unit, higher margins and higher revenue. b. RMS is obtained by dividing the company’s market share by the main competitor’s market share. 1. QUESTIONS MARKS - High Growth, low Share It is not suitable to have many products in this zone. - Investment: High investment to improve market share because they operate in fast-growing markets but have low current market share. - Revenues: Currently positive but limited because they haven’t yet established a strong market position. 2  2. STARS - High Growth, High Share Consume a lot of resources that are required to support this position. - Investment: Significant investment to maintain their high growth and market-leading position. Although they require resources, their potential for becoming future Cash Cows makes them worth the investment. - Revenues: High, as these products already hold a strong market position and benefit from fast growth. 3. CASH COWS - Low Growth, High Share Products in phase of maturity, but that dominate the market. - Investment: Minimal because they are self-sustaining. - Revenues: Very high, as they generate surplus profits with low investment requirements. These funds can then be redirected to support Question Marks or Stars. 4. DOGS - Low Growth, low Share These products are not profitable anymore and may be candidates for elimination. - Investment: Often high (only if there is a reason to keep it) because these products may not be profitable, requiring funds just to keep them afloat. - Revenues: Typically low, which makes them poor long-term investments. ADL (Arthur D. Little): Life cycle competitive position Combines: 1. PRODUCT LIFECYCLE stages: Introduction (QM), growth (S) , maturity (CC), decline (D). 2. COMPETITIVE POSITION of the company’s product: a. Dominant: It controls the behavior of the competition (monopoly) b. Strong: It behaves independently of a possible threat. c. Favorable: Enough freedom to develop their strategies. d. Stable: It has guarantee of continuity. e. Weak: Its development is not satisfactory (change or retire) 3 HUSSEY: Market growth-sales growth Analyses: 1. The MARKET GROWTH RATE (or competitors) 2. The SALES GROWTH RATE in the products considered (average of 3 years) 3. The diagonal is named a ‘LINE OF CONSTANT PARTICIPATION’: to the left side the market grows more than the company (share loss) and to the right side the company grows more than the market (share gain) at the expense of the competitors. It is applied also to compare with the principal competitor. 3. PRODUCT STRATEGIES. 1. PORTFOLIO MANAGEMENT STRATEGIES Portfolio Management: Decides which products to invest in, retain, or eliminate, based on their profitability and market relevance. REASONS TO ELIMINATE REASONS TO MAINTAIN Low profitability, low market share Contribution to fixed costs Transfer of resources (opportunity costs) Help selling other products of the company Harmful for the company’s imagine Expectations of improving the profitability Emotional reasons LINE MODIFICATION A product line is defined by its: 1. DEPTH: The number of different products it contains. 2. CONSISTENCY: How are these products related in terms of use or production. 3. STRATEGIES: a. LINE EXTENSION: Adding new products to the product line. b. CONTINUATION: Keeping the same products in the product line. c. PRODUCTS MODIFICATION: Improve product adding features or improving quality. d. LINE REDUCTION: Removing unprofitable or unnecessary products. 4  PRODUCT LAUNCH CLASSIC STRATEGY SCHNAARS STRATEGY Identification of insights Technological development Selection of best insights Product development Concept development and tests Market targeting Business analysis Product development Just-in-time quick response Market tests Launch to the market CLASSIC STRATEGY SCHNAARS STRATEGY Long process Short process Less products More products, lower lifecycle Lower risk Higher risk Less adaptive to market changes More adaptive to market changes 2. GROWTH STRATEGIES 4. MARKET ENTRY STRATEGIES 5 BRAND 1. CONCEPT AND OBJECTIVES. A brand is more than a product or a service; it's a name, symbol, design, or feature that differentiates one seller's offerings from others. When a brand name represents the entire business, it's often called a trade name (like “Apple” as a brand for various products). - Brand as Value-Added: Brands give additional value beyond functionality, often through mental associations that customers make. - Brand vs. Product: The product includes tangible attributes (like design, country of origin, uses), whereas the brand embodies associations, personality, and emotional connections that help in self-expression and bring emotional benefits to consumers. Product and Brand Relationship: - Brands need a DIFFERENTIATED PRODUCT. A brand often originates from INNOVATION and becomes the largest source of value for a product. - ‘HALO EFFECT’: Knowing the brand name influences the perception that the consumer has on the product and its advantages. - Products are many, the brand gives them OBJECTIVES and CONTENTS. - Each brand must have a STAR PRODUCT that represents its meaning and values. ❖ BRAND FUNCTIONS 1. Efficient Information and Risk Reducer: The customers can better imagine the intable goods with the help of brand name. 2. Satisfy emotional needs. 3. Other aspects that make the brand stronger are the quality and origin certifications as well as legal guarantees. ❖ IMPORTANCE OF THE BRAND 1. The brand represents a RELATIONSHIP between buyer and seller based on TRUST. This relationship is frail and dynamic. You have to take care of it constantly. 2. The brand is the MAIN DIFFERENCE for products, services and organizations. 3. Brands are HARD TO COPY. 4. It represented another step in the DIFFERENTIATION process. 2. EVOLUTION OF THE BRAND. The brand has gone from being a business function of differentiating themselves from the competition to developing a value function for each of the protagonists of the marketing process. The brand has gone through four stage of evolution: 1- Formal Differentiation of Products - Product-Centric Initially, brands functioned just to differentiate products or services by a name or symbol as a way for consumers to identify the brand and differentiate them from the competition. 1 2- Legal Protection Brands then became a legal asset (trademark) to protect against copies and fakes and maintain exclusive rights. - Brand is a sign or set of signs certifying the origin of a product or service and differentiating it from competition. 3- Emotional Attributes - Consumer-Centric Specific attributes that give the buyer not only the basic service of the product category, but also additional services like aesthetic, social, ethic, etc. The brands are kind of positive prejudices strongly established in the culture, only understandable from the emotional plane. 4- Brand as value - Value-Centric The value of the brand is the strategic approach under which the concept of a brand acquires meaning in today’s markets. Enterprises are beginning to understand the brand as an asset capable of providing value and growth by itself to the company. 3. BRAND ELEMENTS. The brand is composed by FOUR ELEMENTS: BRAND IDENTITY Unique combination of functional and mental associations that the brand wishes to create and maintain in the consumer’s mind. It implies a potential promise. BRAND IMAGE The perception consumers have of a brand, including thoughts and feelings associated with it. BRAND POSITIONING Emphasizing the distinctive characteristics that make it different from its competitors and appealing to the public, aiming to capture a strong, unique position. BRAND EQUITY Intangible assets like brand awareness, perceived quality, brand associations (Imagery, feelings, trust), loyalty and proprietary assets (Protection from competition: patents, intellectual properties, relationships and trademarks) that give a brand competitive advantage and make it valuable. 2 4. BRAND DECISIONS. Brand decisions are related to the implementation and development of the brand strategy. Brand policy refers to strategies developed to reach the objectives established by the company strategy. 1. BRAND EXTENSION POLICY Using an existing brand to launch new products (e.g., Coca-Cola releasing Coke Zero). It usually happens on the same market or sectors. However on a different product category, we use the credential of our brand. - Objective: Using all the experiences and image of a brand and its quality to launch new products in different categories under the same umbrella brand. - Risk: If the new product does not successfully satisfy the needs of consumers or lacks the right marketing policies it could damage our brand image. 2. CO-BRANDING POLICY Combining two or more brands, whether they are of the same company or not. - Objective: Getting a higher value, a better image or a clear differentiation of the product, through the union and combination of their previous existing emotional or functional benefits. - Risk: Both brands should benefit to avoid dominance by one partner and it may lead to its dissolution. CO-BRANDING CAN BE BASED ON KNOWLEDGE AND AWARENESS VALUES It pursues a quick acknowledgment of the new Brands want to associate the other’s brand product reaching consumers of the forming values or positioning, and try to multiply their brands. image or value assets together. INGREDIENTS COMPLEMENTARY CAPACITY Manufacturers associate brands in order to Partners share their key success factors and improve products by sharing the best create a product to have a long-lasting technologies from both brands. presence in the marketplace. To implement co-branding policy we must be sure to comply with some basic principles: 1. Brands must be complementary, and it must offer the product a way of improving its mix somehow. 2. There must be a relationship and some common links between users or consumers of both brands. 3. Brand must be homogeneous in terms of market share, awareness, prestige, international exposure or lifecycle. 3  3. BRAND FRANCHISING POLICY Allows another company to use a brand’s name and products (e.g., McDonald’s franchises) for expansion with minimal investment. It implies an agreement or a contract by which a company (franchiser) allows other company (franchisee) in exchange of the payment of some fee, the right to exploit a franchise to commercialize some type of products and/or services. - Objective: To achieve a better and faster growth with a minimum investment. 4. BRAND LICENSING POLICY A company allows others to use its brand or logo in exchange for a royalty fee, extending brand presence without direct production. - The brand becomes an exchange object that can be used for commercial, financial, transactional and almost unlimited purposes between different companies. - Whereas in the franchise policy we give away a product produced by our company to be used under our brand, in the licensing the object is the brand itself, not just a product. - Creates value for: - BUYER: The brand to be integrated under the new company brand’s portfolio, augmenting its value by means of synergies, links to other company brands or business model relations. - LICENSING COMPANY: The financial revenues and royalties. The competitive advantages a licensed brand can offer to the company (i.e.: not having factories, become available in a new chanel) 5. BRAND PORTFOLIO STRATEGIES. Brand Portfolio: Set of brands that a company owns and manages, both internal brands and those external that are somehow linked to the internal ones. - ARCHITECTURE of a brand portfolio: OBJECTIVES of a brand portfolio: 1. Achieve synergies within the portfolio and assign resources that fully support the company’s strategy. 2. Leverage the brands: brands with potential or to retire. 3. Allow to adapt and create new brands in order to maintain a competitive advantage, 4. Develop and consolidate strong brands: ensure each brand has the right level of resources to guarantee its success. 5. Clarify the product's offering. 4 Brand Portfolio Strategy: It defines the structure of the company’s brands, its depth, the interaction and interrelation levels among them and the roles assigned to each of the brands. CHARACTERISTICS of a good brand portfolio: 1. Each brand must have a DEFINED PURPOSE that supports business growth. 2. It must ensure the NEEDED LEVEL OF RESOURCES allocation for current and future brands. 3. It must be COHERENT with the strategic objectives of the company. 4. STRATEGIC CHALLENGES for the future growth must be a focus for our portfolio strategy. 5. It must establish a CLEAR FOCUS for the brands. DIMENSIONS to be fulfilled by a portfolio strategy: 1. Roles: Assign specific roles to each brand (e.g., main revenue driver, entry-level product). 2. Markets: Ensure the brands collectively cover target markets effectively. 3. Strategy: Each brand’s strategy should align with the company’s broader objectives. 4. Relations: Define how brands relate to each other, whether by complementing or differentiating. 5. Knowledge: Develop a deep understanding of each brand’s market, audience, and impact to make informed decisions. 5 MARKET SEGMENTATION 1. CONCEPT AND OBJECTIVES. Market Segmentation is about dividing a broad market into smaller, more specific groups, or segments, that have similar needs or characteristics. Each of these segments can then be targeted with tailored marketing strategies. The purpose of MARKET SEGMENTATION: 1. Meet customers NEEDS. 2. To identify opportunities for NEW PRODUCTS and services. 3. To help in designing the MOST EFFECTIVE MARKETING PROGRAMS to reach more homogeneous groups of clients. 4. To improve the strategic ALLOCATION OF MARKETING RESOURCES. 2. MACROSEGMENTATION. Divides the market into product markets, grouping broad customer needs with technologies or industries that fulfill those needs. → EVOLUTION OF THE PRODUCT-MARKET 1. New technologies can meet the SAME FUNCTION or need. 2. NEW FUNCTIONS could be met by a modified or improved product. 3. Other CUSTOMER GROUPS with a need or function in common. 4. One product can offer a VARIETY OF FUNCTIONS. 5. Needs are best met when products feature a SMALL NUMBER OF FUNCTIONS. 3. MICROSEGMENTATION: STAGES. Microsegmentation goes deeper than just broad market segmentation. It takes larger product markets and divides them into very specific, detailed segments based on finer characteristics. 1. VARIABLES Two types of variables help create these smaller segments: 1. Explained Variable: These are the outcomes or behaviors that the segmentation aims to explain. - Whether a customer chooses to buy a product. - The level of preference for a certain brand or product characteristic. - Brand preference: Understanding why one group prefers Brand A over Brand B. 2. Explanatory Variables (Segmentation Criteria): These are the characteristics used to define each segment. The goal is to create groups that are: 1  - Homogeneous within each group (customers in the same group are as similar as possible). - Heterogeneous among groups (groups are distinct from one another). → Stages of Microsegmentation To create these smaller, detailed segments, companies often go through two main stages: First Order Segmentation and Second Order Segmentation. 1. FIRST ORDER SEGMENTATION: Divides by the value the customer seeks from a product, like quality, price, durability, etc.. 2. SECOND ORDER SEGMENTATION a. Profile, Buyer, Characteristics: Looks at geographic, demographic and socioeconomic characteristics (e.g., young adults looking for affordable cars vs. older professionals looking for luxury). b. Behavioral: Purchase habits, brand loyalty, usage rate, media behavior. c. Psychographic: Lifestyle, values, personality d. Value of the Client: Evaluates each segment’s long-term potential and profitability for the company. - MVCS (most valuable customers): Profitable clients. - MPC (most potential customers): Clients with potential to become valuable over time. - BZS (below zeros): Non-profitable clients. 2. SEGMENTATION TYPE Two ways to market segmentation: 1. Descriptive segmentation or ‘A Priori’: Segmentation based on pre-established, observable characteristics. a. The market is divided using known criteria like age, income, or geographic area. 2. Segmentation ‘A Posteriori’: Segmentation based on research and data analysis. a. Uses market research to identify new, meaningful customer segments. b. Steps: i. Market research on consumer’s expectations. ii. Determination of socioeconomic, geographical, behavioral, etc. profiles. 3. SEGMENTATION TECHNIQUES 1. Dependence Techniques: Focus on understanding how specific variables relate to others, helping identify homogeneous segments and selection criteria for those segments. a. Correlations, mean differences, ANOVA (analysis of variance), linear regression. 2  2. Interdependence Techniques: Reveal the complex relationships between multiple variables, providing insights into how different factors influence each other. a. Cluster Analysis. b. OBJECTIVES: Identify Multiple and Simultaneous Interdependence Relationships: Understand how various factors are related and how they interact with each other to influence consumer behavior. 4. SEGMENT VALIDATION To ensure segmentation is useful, the following criteria are considered: 1. Differentiated segments: a. MOST IMPORTANT CONDITION: to maximize the differences between groups (heterogeneity) and to minimize the differences between buyers inside each group (homogeneity). b. The lack of heterogeneity can generate cannibalism among products of the same company destined to different segments. 2. Measusable segments: Characteristics like size and purchasing power can be measured. 3. Substantial and stable segments: Segments should be large and stable enough to justify their own marketing strategies. 4. Accessible segments: The company should be able to reach the segment effectively. 5. Adequate segments for the company: Segments should align with the company’s resources and goals. 5. SEGMENT ANALYSIS MCKINSEY-GENERAL ELECTRIC MATRIX The 5 steps of segment analysis: 1. Select factors and criteria to measure: a. Market Attractiveness: Customer needs, demand growth rate, number of competitors, differentiated product, low power of suppliers, available infrastructure, financial aids, socioeconomic b. Competitive Advantage: Market Share, product image, profitability,, low production costs, flexibility, product quality, consumer loyalty. 2. To weight the factors of the market attractiveness and the competitive position of the company. 3. To evaluate the current position of every potential target market in every factor. 4. To project the future position of each market based on expected environmental, customer and competitive trends. 5. To select segments and to assign resources: TARGET MARKETS 3 4. SEGMENTATION STRATEGIES. There are several approaches to market segmentation: 1. FULL MARKET COVERAGE: Targets all segments. → Undifferentiated: One strategy for the whole market. E.g., Coca-Cola’s original formula. → Differentiated: Tailored products for each segment. E.g., Coca-Cola offering Diet Coke, Coke Zero, etc. 2. SINGLE SEGMENT CONCENTRATION - One segment, one product 1. Focuses on one specific group of buyers with one product. Common in small and medium enterprises (SMEs). 2. ADVANTAGE: The company can produce and market more efficiently, potentially lowering costs. 3. DISADVANTAGE: Higher risks - If the chosen segment faces challenges (like changes in consumer preferences), the business may suffer significantly since it relies on just one group. 3. MARKET NICHE - One subsegment one product 1. Focuses on a very specific segment with unique needs. This approach is becoming more common 2. ADVANTAGE: Competitive advantage - they are usually better protected from competitors, as they cater to specialized needs. 3. DISADVANTAGE: By narrowing the focus too much, the potential number of customers shrinks, which can lead to lower profits. 4. SELECTIVE SPECIALIZATION - Some segments, some products 1. Targets several segments, offering unique products for each. 2. ADVANTAGE: The company reduces the risk of relying on just one market. 3. DISADVANTAGE: Lack of synergy - Different segments may not work together, meaning the company might miss out on efficiencies or opportunities to create stronger brand connections. 5. PRODUCT SPECIALIZATION - One product, all segments 1. Focuses on one product that serves multiple market segments. 2. ADVANTAGE: The company can build a solid reputation and expertise around a specific product. 3. DISADVANTAGE: Risk that the product may be supplanted by a new technology. 6. MARKET SPECIALIZATION - All products, one segment 1. Offers all products needed for one specific market segment. 2. ADVANTAGE: The company can establish itself as a go-to provider for a specific group of customers, enhancing loyalty. 3. DISADVANTAGE: If the segment faces financial issues or reduces in size, the company may struggle because it depends heavily on that one group. 4